Executive Briefings

Aerogistics: Insights on Emerging Markets and Supply Chain Complexity

The aerospace and defense (A&D) industry is experiencing a prolonged surge in growth. Factors include robust demand in new and emerging markets, as well as increased exports of military equipment. Along with these promising new opportunities, however, comes a fresh set of supply-chain challenges.

 

On the commercial side, the industry is enjoying its third consecutive year of record activity. In 2014, Airbus and Boeing reported new orders representing more than $1 trillion in sales, with the number of bookings double that of production levels. The resulting order backlog should ensure continued profitable growth for the industry through 2016 and 2017.

According to UPS's "Aerogistics: Insights on Emerging Markets and Supply Chain Complexity" whitepaper, manufacturers are making deep inroads into emerging markets, with growth driven by a burgeoning middle class and resulting demand for more flights in those parts of the world. Air travel in the Asia-Pacific region alone will grow at nearly three times that of the United States through 2030. Other countries offering strong opportunities for new business include Russia, India and Brazil.Aerospace executives are acutely aware of the need to satisfy ever-rising customer expectations. That goal becomes even more difficult to achieve as supply chains grow longer and more complex. Nevertheless, demands for high-quality service are intensifying at every node in the network  between airlines and original equipment manufacturers, and between OEMs and parts suppliers as well as their maintenance, repair and overhaul (MRO) service providers.One solution to overcoming the issue of distance is to place manufacturing and support services closer to the point of demand. The top drivers behind this strategy are a desire to improve service, meet customer demands for faster response times, and address the shrinking cost benefits of producing in China and other supposedly low-cost countries.As manufacturers ramp up their presence in emerging markets, they encounter a new set of challenges related to regulatory compliance, product issues and the need for local expertise. Many are solving the problem by partnering with trusted logistics service providers. These entities are fulfilling a wide range of tasks, including warehousing, parts kitting, creative transportation options and end-to-end visibility. As a result, they are helping aerospace OEMs to achieve ever-higher levels of product and service quality, even as they confront the new challenges of emerging markets.

 

 

On the commercial side, the industry is enjoying its third consecutive year of record activity. In 2014, Airbus and Boeing reported new orders representing more than $1 trillion in sales, with the number of bookings double that of production levels. The resulting order backlog should ensure continued profitable growth for the industry through 2016 and 2017.

According to UPS's "Aerogistics: Insights on Emerging Markets and Supply Chain Complexity" whitepaper, manufacturers are making deep inroads into emerging markets, with growth driven by a burgeoning middle class and resulting demand for more flights in those parts of the world. Air travel in the Asia-Pacific region alone will grow at nearly three times that of the United States through 2030. Other countries offering strong opportunities for new business include Russia, India and Brazil.Aerospace executives are acutely aware of the need to satisfy ever-rising customer expectations. That goal becomes even more difficult to achieve as supply chains grow longer and more complex. Nevertheless, demands for high-quality service are intensifying at every node in the network  between airlines and original equipment manufacturers, and between OEMs and parts suppliers as well as their maintenance, repair and overhaul (MRO) service providers.One solution to overcoming the issue of distance is to place manufacturing and support services closer to the point of demand. The top drivers behind this strategy are a desire to improve service, meet customer demands for faster response times, and address the shrinking cost benefits of producing in China and other supposedly low-cost countries.As manufacturers ramp up their presence in emerging markets, they encounter a new set of challenges related to regulatory compliance, product issues and the need for local expertise. Many are solving the problem by partnering with trusted logistics service providers. These entities are fulfilling a wide range of tasks, including warehousing, parts kitting, creative transportation options and end-to-end visibility. As a result, they are helping aerospace OEMs to achieve ever-higher levels of product and service quality, even as they confront the new challenges of emerging markets.

 

Learn more about how UPS can help A&D companies successfully navigate emerging markets by downloading the full whitepaper.